CHAPTER-I

INTRODUCTION

1.1 Introduction to Management

1.2 Concept of Manufacturing in Industry
1.3 Role of Materials Management in
Production Process
1.4 Stores Management- An Overview
1.5 Defining the Subject
1.6 Rationale of the Study
1.7 Role of Personnel in Stores and its
Impact on Stores Efficiency
1.8 Worldwide Warehouse Technology Interface
1.9 Current trends in Stores Management in India
1.10 Electronics Industry-An Overview
1.11 Summary

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1.1 INTRODUCTION TO MANAGEMENT

In the context of paucity of capital, material and skilled manpower resources

and development of basic supportive life-structure, the management of a business or
manufacturing firm is confronted today with a much greater challenge than ever
before. Generally the top managers of companies are confronted with endless stream
of problems that arise from continuing inflation, the energy crisis, high taxes, and
government regulations, shortage of capital, worker dissatisfaction, declining
productivity and intense competition. All this emphasizes the need for tackling these
problems in a systematic but calculated manner which in essence is the Function of
Management.

Historical Background of Management

The word Management has historical significance. The Hindu Mythology as

well as Greek and Roman Mythologies have references to Management especially
during wars. Bible and Bhagwat Geeta have references about Management. In
Maharashtra, the Great saint Shri Samarth Ramdas Swami had given systematic
thought to Management.

Definitions of Management

The term Management is applied in different ways to different aspects of

business administration. The following definitions represent the wide spectrum of
Management thinking. In Modern history Henry Fayol and F. W. Tailor are referred
to as the pioneers of Modern Management thoughts.

(a) Peter Drucker conceived it as a multi-purpose organ that manages a business

and manages managers, workers and work.
(Peter Drucker-The Practice of Management).

(b) Additional definition of Peter Drucker (1968) ‘Management must always, in

every decision and action, put economic (in terms of the organization)
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 performance first. Therefore management is an economic organ in an
industrial society. Every act, every decision, every deliberation of
management has its first dimension as an economic dimension’.

(c) Lawrence A. Appley describes it in a simple way as manager’s job

which he equates it with “human relations job that functions through several
major activities and that, human relations…the beginning and the end of the
management Job” .
(Lawrence A Appley-Management in Action).

(d) Henry Fayol (1916) “To manage is to forecast and plan, to organize, to
command, to co-ordinate and to control”.

(e) Koontz and O’Donnell (1976): “The five essential managerial functions are
planning, control of physical resources, organizing, staffing, leading and
controlling”.

(f) According to Kimball and Kimball, “Management is the art of applying the
economic principles that underline the control of men and material in an
enterprise under consideration”.

(g) American Association of Management says “Management is guiding human

and physical resources into dynamic organization units which attain their
objectives to the satisfaction of those served and with a high degree of morale
and sense of attainment on the part of those rendering services”.

h) According to William Spriegel and Richard H.Lansburgh “Management is

that function of an enterprise which concerns itself with the direction and
control of the various activities to attain the business objectives. Management
is essentially an executive function; it deals particularly with the active
direction of the human effort.

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 These definitions, although individual, do have common elements the need to
control, plan and organize the organization’s activities, bearing in mind social and
economic considerations. Therefore, management is concerned with evolving
workable plans which are then put into action resulting into certain consequences
which have to be observed and evaluated and constantly compared with the objective
prescribed in the plans.

4
Elements of Management
- To firmly decide objectives and planning.
- To set up an organization and assign responsibility and authority.
- To co-ordinate and direct activities as decided.
- To decide standards and effect control accordingly.
- To motivate staff to achieve desired goal as decided of the organization with
good co-operations with various departments and people for smooth flow of
operations efficiently and economically.

Industrial Management plays a key role in organizing all the basic factors of
production, in ensuring their coordinated functioning of different sections of the
industrial or economic enterprise, in optimizing the production of goods and services
and finally in securing their most advantageous disposition in the market to maximize
profits. Therefore, efficient and successful management depends on well conceived
principles. It is essential that management should strictly follow the decided
procedures/norms.

Dr. Fredrick Taylor was probably the first person to perceive the vital
importance of management and therefore, was rightly acclaimed as the father of
Scientific Management. Taylor’s principal concern was not only that of increasing
efficiency in production, lowering costs and raising profits but also making possible
increased wages for workers through higher productivity.

The fundamental principles that Taylor’s scientific approach to management

may be summarized as follows –
-Replacing rule of thumb with science (organized knowledge)
-Obtaining harmony in group action, rather than discord.
-Achieving cooperation of human beings, rather than chaotic
individualism.
-Working for maximum output, rather than restricted output.
-Developing all workers to the fullest extent possible for their
own and their company’s highest prosperity.

5
 They assume that workers must be persuaded, rewarded, punished, controlled
and directed, if coordination of effort is to be achieved. Taylor concerned himself
with individual efficiency ratings, arm movements, muscle fatigue, production rates,
and largely ignored individual needs. Thus, the theory of scientific management grew
out of the precepts of classical organization theory.

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Five Fundamental Sets of Management Functions

Entire process of management can be broadly divided into five sets of

actions/functions with the aim of getting the best from working force of people one
posses at a given time –

1) Planning- H.Simson (1959) has defined planning as “A technique whereby

the skills of a variety of specialists can be brought to bear on the probe before the
formal stage of decision making is reached”. The process of setting performance
objectives and identifying the actions needed to accomplish them administrates in
proper planning.
(Kenneth Lysons and Michael Gillingham-2003)

2) Organizing-Organizing means the manager co-ordinates the human and

material resources of the organization. It covers dividing and combining effects of a
working force for making such joint efforts more productive, effective and fruitful is
termed as Organization. Organizing, along with planning, controlling and leading is a
key management function. Organizing may be defined as “the process of structuring
tasks and working relationships into manageable components and coordinating
human effort to achieve organizational goals.”
(Kenneth Lysons and Michael Gillingham-2003)
This is the process of dividing up the work to be done and then coordinating
results to achieve a desired purpose
(Kenneth Lysons and Michael Gillingham-2003)

3) Motivating - Motivation refers to the forces within an individual that

account for the level, direction and persistence of effort expected at work.
Managers motivate and direct subordinates. Motivation has been defined by
Tony Proctor (1982) as “A motive is defined as an inner state that emerges,
activates or moves and directs or channels behavior towards goals”.

4) Controlling-Controlling means managers attempt to ensure that there is no

deviation from the norms or plan. It is an executive process involving three

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 important elements which include standards, evaluation and correctives. This
means monitoring performance, comparing actual results to objectives, and
taking corrective actions where necessary.

5) Coordinating-Kenneth Lysons and Michael Gillingham (2003) have defined

coordination as “the purpose of all organization and the glue that holds
organizations together”.

Importance of Management
In a national economy, Management becomes a critical element in facilitating
economic growth. A country like India, have scarce capital but abundant manpower
and other natural resources. To be competitive in world market these resources
should be combined and coordinated so as to get maximum benefits. Management is
the dynamic, life giving element in every organization, since it coordinates current
organizational activities and plans future ones. The importance of management lies in
the fact that it provides new ideas and vision to the organization to do better. Lastly,
it is only through management that an enterprise can meet the challenge of change,
provide stability, and ensure optimum manpower utilities.

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1.2 CONCEPT OF MANUFACTURING IN INDUSTRY

The wealth of a country is measured by its gross national product - the output
of goods and services produced by a nation in a given time. Goods are physical
objects, the tangibles that we can touch, feel or see; whereas the services are the
performance of useful functions such as banking, medical care, restaurants, clothing
stores or social services.

Wealth is measured by amount of goods and services produced. India is

having rich natural resources, such as mineral deposits, farm land, and forests, which
are only potential sources of wealth. It is the production function that is needed to
transform these resources into useful goods / products.

There are many stages involved between the extraction of resource material
and the final consumer product. At each stage in the development of the final
product, value is added, thus creating more wealth. If ore is extracted from the earth
and sold, wealth is gained from our efforts, but those who continue to transform the
raw material will gain more and usually create greater wealth. Japan is a prime
example of this. It has very few natural resources and it buys most of the raw
materials it needs. However, the Japanese have developed one of the wealthiest
economies in the world by transforming the raw material they purchase thus adding
value to them through manufacturing.

Manufacturing companies are in the business of converting raw materials to a

form that is of far more value and of use to the consumers than the original raw
materials. Logs are converted into tables and chairs, iron ore into steel, and steel into
cars and refrigerators. This conversion process called manufacturing or production,
makes a society wealthier and creates a better standard of living.

To get the most value out of our resources, we must design production
processes that make products most efficiently. Once the processes exist, we need to
manage their operation so as to produce goods most economically. Managing the
operation means planning for and controlling the resources used in the process, like

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labour, capital and material. The flow of materials controls the performance of the
process. If the right materials in the right quantities are not made available at the right
time, the process would not produce what is wanted to. Labour and machinery will be
poorly utilized. The profitability, and even the existence, of the company will be
threatened.

Nature of production
Among all the functional areas of management, production is considered to be
crucial in all industrial organizations. Production is the process by which, raw
materials and other inputs are converted into finished products. Some people try to
draw distinction between the two terms - production and manufacturing.
Manufacturing is understood to refer to the process of producing only tangible goods,
whereas production includes creation of both tangible goods as well as intangible
services.

Nature of production can be better understood, if we view the manufacturing

function from three angles:

Production as a system,

Production as an organizational function and

Decision-making in production

Production system concepts

A system is understood as a whole which cannot be taken apart. It must be
studied as a whole.

Production System: A system, whose function is to convert a set

Conversion Sub System:
Control Sub-System:
of inputs into a set of desired outputs
A sub-system of the larger production system
where, inputs are converted into outputs
A sub-system of the larger production system
where a portion of the output is monitored for
feedback signals to provide corrective action
if required.

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1.3 ROLE OF MATERIALS MANAGEMENT IN
PRODUCTION PROCESS

Introduction to Materials Management

Management encompasses all the functional areas like Production, Materials,

Finance, Marketing and Human Resource Management. The Industrial Management
Branch deals with mainly manufacturing management. It relates to sub systems of
raw material procurement, stores and inventory control, production planning system
on the basis of market forecasting.

Production and Operations Managers felt to have organized sections who have
knowledge related to Planning, Acquisition and Utilization of materials in the process
of Production and has resulted in discipline known as “Materials Manager”.

Basic aim to assure the overall cost of materials is kept at the lowest possible
level without interruption of production schedule for which materials manager has to
be given overall authority and responsibility to run his department efficiently.

The efficiency of any organization depends on the availability of materials,

component parts under “5Rs” which includes Right Quantity, Right Quality, Right
Price, Right Source and Right Time. Failure in any of these factors increases costs
and decreases profit as certainly as outdated production methods or ineffective
techniques.

Materials as an input in production system started receiving attention of the

industrialists from 1970 onwards. Further, after adaption of New Economy Policy
(which is popularly known as Liberation of the Economy) in India in the year 1991,
the Industries have to face various challenges to enter into the global market and to
compete with the multinational companies. At this time Materials Management got
its importance by the Indian Industries. Earlier Materials Management was being
considered only as department responsible for procurement and storing of materials.
However, due to the various contribution in terms of cost reduction, were noticed due

11
to Scientific Materials Management, and the due importance was received after effect
of Globalization in Indian Industries. Now, materials have occupied prominent place
among the “Five Ms”-(Men, Machine, Money, Materials and Methods) and this will
continue to be so in the years to come. The resources are processed, planned,
organized, coordinated and harmoniously related and controlled with a view to
achieve the end results.

It can be stated that in any industry, materials form about 50-60% of the total
manufacturing cost. The remaining portion being contributed by labour and other
overheads costs. It is therefore imperative that even a small 5 to 10% saving in
material costs – which are possible to achieve by employing modern scientific
techniques - will contribute sizeable to reduce the manufacturing cost than by
reducing the same amount in overhead or labour cost which is slightly difficult to
achieve. D. S. Ammer and Victor H. Pooler (1969) need to view purchasing as Profit
Centre. Both the authors used the materials management concept to express the
materials savings directly improve profits as a higher power factor than only
increasing sales. It is stated that Japanese Management always believe in cost
reduction in materials to increase their profit rather than increase in price to the
customers. It is in view of these factors that, the materials management function
started getting its due share of importance.

In any manufacturing Organizations, materials form a substantial portion of

the total cost of final product. Therefore, the profitability depends to a large extent on
how the materials functions are managed. Since the Industrial Revolution, for quite
some time, due importance was not being accorded to the various functions of
Materials Management. In fact, there was no Materials Department in existence at all.
This department was usually called Purchase or Procurement Department. This
department was being considered as a department responsible for procurement and
storing of materials.

Materials Management is a continuous struggle between too much or too little

of materials and too soon or too late the availability of materials. The American
Production and Inventory Control Society (APICS) defines Materials Management as
“the grouping of management functions supporting the complete cycle of material
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flow from the Purchase and Internal Control of Production Materials to the planning
and control of work-in-process to the warehousing, shipping, and distribution of the
finished products”.

The groping of all functions concerned with the flow of materials from planning
for procurement, to ultimate delivery to customer can be shown as -

Logistics closely related to concept of Supply Chain Management is essential

corner stone of competitive strategy, increased market share and shareholder value for
most organizations. Logistics management comprises both inbound logistics
(concerned with flow of materials and components from the suppliers to the
production system) and outbound logistics (distribution of the product in the channel
of distribution, finally to the end user). Inbound logistics is also known as materials
management. Since both materials management and logistics management are
integral parts of Supply Chain Management which has become a strategic area in
modern business.

Materials Management and Logistics Management are two alternative names

sometimes used to refer to Supply Chain Management within a single firm. Some
organizations have centralized their diverse materials management functions under
one department headed by a Materials Manager or Supply Chain Manager or
Director-Materials Management. Four important activities in materials management
or supply chain management are-

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 (i) Purchasing
(ii) Logistics
(iii) Warehousing/Stores and
(iv) Expediting.

Logistics management is the management (i.e. planning, execution and

control) of all functions that affect the materials flow and the information about it,
seen from the perspective of customer requirements, for the purpose of achieving high
delivery reliability, a high degree of delivery completeness and short delivery time.

Logistics management function involves short term materials planning, the

supply of raw materials and other purchased goods, internal transportation, storage
and physical distribution. It is sometimes also referred to as materials management
and / or integrated business logistics.

Supply chain management is a systems approach to viewing the supply

channel and distribution channel as a whole rather than a set of fragmented parts. It
differs from traditional approaches on inventory control and focuses on management
of inventory through the entire supply chain. Supply Chain Management should be
considered as a logical extension of the logistics concepts. In order to be able to
manage costs throughout the supply chain, effective and cooperative supplier
relationships are required. Hence, purchasing and supply management (including
supplier management) can be viewed as an integrated part of supply chain
management which encompasses both the logistics and the purchasing and supply
function.

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Stores and Inventory Control

This involves physical control of materials, preservation of materials,

minimization of obsolesce and damage, timely disposal of scrap and surplus, efficient
handling, maintenance of stores records, proper location of stocking. The inventory
control covers aspects such as setting inventory levels by different techniques like
fixing economic order quantity, standardization- variety reduction techniques etc.

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1.4 STORES MANAGEMENT: AN OVERVIEW

Management of stores is one of the prominent and vital functions of Materials

Management in any manufacturing industry. Materials Management in itself has
remained a perplexing problem to many organizations. There are ample growth
potentials for this particular branch of management as far as the body of knowledge is
concerned. The practicing Managers and professionals have been trying to explore
their vast experience to add innovative ideas so as to benefit the manufacturing sector
irrespective of the nature of products they manufacture.

The term Stores-Depot originated from Latin depositum. The word Gudam
from Portuguse Gudaio. Store refers to material and store also refers to premises
where materials are held.

The concept of Stores or Warehouse is known from the time of ‘Kautilaya

Arthashtra’, the famous Minister of Chandragupta Maurya gives a detailed description
of storage practices, well defined directives of “Keeper of the Crown Storehouses”,
the qualifications needed for them etc. He has defined the role of Storekeeper or
Warehouse In- Charge in Sanskrit Sloka which is given below-

ूवीणो वाकपटु ः धीमान ् |

“ूवीणो
ःवामी भ िनय:
िनय |
ूलुधः सयवाद च |
भाडगार स इंयते” ||
कौ'ट(य
-कौ'ट(य

This Sanskrit sloka suggests that “Storekeeper or Warehouse Manager should be

Truthful, adept in the art of Communication, should be Intelligent, Loyal to the
Organization and should suppress personal greed”.

In recent history “Shri Sant Samarth Ramadas Swamy” has also referred to the
effective stores management in “Dasbodha”.

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 In India, in many parts of the country surnames, referring to be function of
stores are seen, such as –
-Kothari,
-Bhandarkar,
-Bhandari etc.

This suggests that these people were engaged in stocking, distributing goods
and merchandise. Though the concept of warehousing has been prevalent for over
2000 years, the warehouse has not yet obtained due recognition. In fact, it is
considered as a dumping ground for unwanted people in quite a few organizations[1].

The term Store, Storehouse, or Warehouse refers to a building or room or place

where materials which is also called as inventory are kept. The two words “Store”
and “Warehouse” are used synonymously in India while in the West the word
“Warehouse” is preferred. In some context Warehouse is referred to Finished Goods
and distribution work is carried out from this point. In factory, “stores” perform the
same functions as Warehouses and contain raw material, work-in-process inventory,
maintenance spares and finished goods. Since they perform the same function, stores
or warehouses are treated alike in this research. Since in number of industries
finished goods distribution system is carried out through finished goods- stores of the
organizations under the separate division of “Finished Goods Stores”.

1
Gopalakrishnan, P. Handbook of Material Management. New Delhi: Prentice-Hall,
1994. Print.

17
1.5 DEFINING THE SUBJECT
Many modern manufacturing organizations have realized the importance of
the stores management in India. As a result of which, the practicing managers in such
business organizations have been adopting the latest storage systems suiting to the
needs and wants of the production activities.

Basically, the storage system can be viewed broadly from three, classified
systems approaches, viz.
• Receipt system
• Physical upkeep and maintenance system and
• The issue system.

As the names suggest, their functions are apparent. In an organization bustling

with materials needs, the systems design should not only permit matching of present
requirements with the existing supplies, but also take care of the future growth
potential and demands. It is therefore, important that the system should be flexible
enough to change with the changing environment and production demands.

Objectives of Storage Function

The main objective of the storage function is to render service to the users.
The end user could be any department in the manufacturing unit requiring
materials and other items kept in stores for the purpose of actual usage in the
production process or helping the production function indirectly. As A.K. Datta[2] has
put it, the regular activities that comprise the storage function are as under:

i) Receive the material, check them for quantity, coordinate for inspection
and quality checks, and prepare the goods receipt notes.

ii) Accept the already passed materials, prepare the rejection notes and
complete the formalities for payment of bills.

2
Datta, A K . Materials Management Procedures, Text and Cases. New Delhi-
110001: PHI Learning Pvt. Ltd.

18
 iii) Take into stock the accepted materials, store them in respective locations
as pre-determined

iv) Check issue vouchers, make actual issues and account for them.

v) Keep the purchasing people well-informed through systematic indents and

other reports.

vi) Keep the storage place clean for facilitating handling and movements and
observe all safety measures and security regulations.

The present study is aimed at the existing practices being applied in

performing the stores function with special reference to the electronic industries
involved in manufacturing various goods and items. As such, the job of the store
manager differs in terms of the nature of the products they have to deal with. The
stores management practices that are observed in say, like cement or fertilizer
industries may not be necessarily similar one to that of electronic industry, obviously
on account of the nature of the products. However, the functions and the other
activities like record keeping, safety and such other issues may be similar in other
industries. Many a times, due to some internal problems and lacuna, the stores
performance can have limitations.

Eventually, the very purpose of managing the stores remains in effectively

planning, organizing, controlling and delivering the performance that can result into
reduced cost and improved service in warehouse and stores operations. To get the
desired results, there is always a need to train the personnel involved in various stores
operations. In many cases, the warehouses and stores are under-rated and are
considered those departments incurring undue costs. However, it is not a fact. In fact,
if managed properly, the stores or warehouses can play a great role in reducing costs
and thereby increasing the profit margins and contributing in company’s financial
performance.

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 Besides other issues, the job of Stores Manager is to manage the stores, to
protect the inventory from damage, theft and other such losses. Even a slight
mismanagement can cause overall cost to rise. As far as the electronic industry is
concerned, some of the components and adhesives are very sensitive in nature and are
having short shelf life which is to be taken care of by stores staff. Such electronic
sensitive items need suitable means and methods to store them to protect its original
characteristics. As regards shelf life of an item, proper attention is always required to
avoid stocking expiry date.

Record maintaining is one of the crucial functions of the store manager. With
the accessibility and availability of various computer-aided devices and software,
recording the transactions of the stores has become an easier job than it was earlier.
What really matters in such situation is the capability of the personnel operating such
devices. Organizations must see to it that appropriate infrastructure is provided for
facilitating the function. Various forms have to be filled and recorded during the
actual transaction processes. Computers with compatible systems can help the
operations to happen smoothly. Similarly, the materials handling equipment also play
a vital role in the efficient functioning of the stores. Their timely upgrading and
maintenance can save time, money and energy. Both human and machinery have to
contribute to the ultimate success in store performance.

Keeping in view the above issues, the researcher has selected the subject to
acquire in-depth knowledge of the current practices in store management in electronic
industry.

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1.6 RATIONALE OF THE STUDY

One of the objectives of this study is to study the impact of interference by

other departments in store activities that may hamper the functions. It is imperative
for store department to interact with other departments like finance, marketing, human
resource, and above all purchase and production.

There are various modern systems like ‘Just-in-Time’ that are implemented in
a few organizations only. There are many others who are not using the same. The
study is also directed to know the advantages and disadvantages of implementation
and non-implementation of systems in store from inventory point of view. During the
informal discussion with some of the key members in store department of other
electronic companies, the researcher has come to know that some of them were not
aware of such technique. The researcher has therefore taken this as one of the
objectives of the study.

Pune region has been known for its presence of diversified manufacturing
industries in India. Electronics industry is one of the well established industries in this
region. Many national and internationally renowned companies in electronics business
have made Pune as one of their prominent locations for manufacturing various
electronic items.

The electronic industry is presently having impact on many industries such as

mechanical, automobile, electrical, agricultural, chemical industries. Hence, the
researcher thought that with his experience of many years in the electronics
manufacturing industry, he would be able to study and contribute in the area of stores
management in the Pune Industrial Belt.

With this view many aspects related to stores management were considered
for this research.

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Relationship between stores and other major departments in manufacturing
industry

Stores play a key role in maintaining the overall efficiency in manufacturing

organizations of all types of products. Store is directly related to several departments
in such organizations. Some of the key departments that need the services of the store
are as under[3]:

Production Department: This department is one of the major service users of the
store facilities as all the materials required by the production unit are provided as and
when required. However, to get the materials at appropriate time, it is essential for the
production department to give adequate warning of its need to the stores. Non
compliance or late compliance of such act would result into interruption in production
process. The personnel in the production department should consider their prime
responsibility to give proper issue voucher duly signed by appropriate authorities
within time to the store about the material required, its quality and quantity required
and also the future demands to be noted in advance.

Maintenance Department: This department especially looks after the timely

requirements by various engineering experts who are responsible for maintaining the
plant and machinery to avoid breakdowns and to facilitate uninterrupted production
schedule. To help this department, store has to be alert at all times and has to work on
the basis of the requirements given to stores by the engineering section. Storage of
spare parts of the machinery, other tools and equipment are stored in the store
department. Thus there is frequent interaction of stores with the maintenance
department.

Distribution of finished goods: The stocks of the finished goods stored in store
department needs to be dispatched as per the schedule of the distribution network. In
many industries they have their own warehouses at different locations, where the
finished goods are dispatched for the purpose of meeting the needs of the area. The
prompt distribution to such warehouse locations and depots becomes a vital function

3
Carter, Ray , Philip M. Price, and Stuart Emmett. Stores and Distribution
Management. Bromborough, Wirral: Liverpool Business Publishing, 2005

22
of the stores department. Stores management has to ensure that adequate stocks are
available in sufficient quantities by providing appropriate logistic services. To
facilitate the smooth functioning of the distribution, the department looking after
distribution must interact with stores department in view of the needs and wants of the
distribution system. The timely and accurate information exchanged by these two
departments can benefit the organization by serving the end users of their products.

Purchase Department: In most of the manufacturing organizations, the stores and

purchase departments are functioning under the head of Materials Manager.
Purchasing department is responsible for buying all goods and services, equipments
and tools needed for the organization. Store s supports the activities of purchase
department, as the stocks are kept and informed by the stores to the purchase
department at frequent intervals. Thus both the departments interact with each other to
maintain optimum inventory level.

Quality Control & Inspection: This department is responsible for administering the
standards set by the organization in relation to all the materials both used and
produced by the organization. Inspection is most important part of the process. It is
the duty of the stores management to ensure that all deliveries of goods are held aside
until checked and passed by quality control, and must set up a system for informing
quality control that items have been delivered. All items checked and subsequently
rejected have to be held by stores. Store department’s critical job at this juncture is
that it has to see that the rejected stock is appropriately labeled and stored at separate
area from inward goods stores or holding goods stores so as to avoid its mixing with
other usable stocks in production process.

Sales Department: The stores department has to ensure that all stocks held for sale
are stored, issued and controlled as efficiently as possible. The process of stocking as
per the nature and packaging of the product becomes of paramount importance at this
stage. The safety and security of the finished goods lies in stores department. Stores
department has to be informed of the forecasts of future sales, so as to be able to make
plans in terms of stock levels, storage space, outside warehousing etc.

23
General Accounts Department: Accounts department relies on stores for information
concerning the value of the stock held and about damaged /surplus /non-moving
items, therefore to be written off the asset list. Moreover, accounts department often
asks the stores to confirm the receipt of the items and / or goods as invoiced,
especially in case of doubts and query. One of the functions of stores is to provide
continuous supply of data regarding the issue of stock in the operations and therefore
it aids the accounts department in its function of cost allocation to particular batches
or jobs as carried out by the operation function.

Storekeeping is primarily a service function in which the storekeeper acts as a

custodian of all items carried in the stores. The efficiency of the store service can
directly affect the company’s overall performance. This department has to therefore
work to minimize the cost of operation. Even if the stores department itself does not
get involved in purchase, order periods, usage rates, etc. it requires the data to plan for
storage area. Storekeeping thus needs to go for planning function of the management.
However big the area of any stores or warehouse may be, it has its own limitations of
space and facilities. While setting up of any new factory, the organization has to
carefully plan the location and layout of the stores. Physical organization management
of stores is an important factor to be considered.

Materials enter an organization as raw materials, components, spare parts or as

consumable items. Raw materials and components get converted into ‘work-in-
progress’ and finally into finished goods that are sold. Spares and consumables are
utilized for the smooth functioning of production machinery.

Stores/ Warehouse in manufacturing industry

Functionally, the goods that are held in stock enable a smooth adjustment of
demand and supply. They act as buffers between factors that raise the demand and
those that meet the requirements. Warehousing in this sense is not the simple act of
storing goods, but rather a package of services that enables the smooth running of the
wheels of industry, supplying raw materials to the operations executives and finished
goods to the customers. Thus, the prime purpose of warehousing/stores is strategic
deployment of marketable goods in such a way as to minimize the total distribution
costs and maximize customer service.
24
1.7 ROLE OF PERSONNEL IN STORES AND ITS IMPACT ON
STORE EFFICIENCY

The efficiency and productivity of stores depends upon the management of

various organizational matters. Personnel in the stores have a great deal of importance
in day to day operations of the stores.

According to J.P. Saxena[4], stores division consists of the following operations:

Delegation of authority

Record keeping

Printing of stationery
Typical Organization Structure of a Stores Division
Store Manager

Engineer, Inventory Officer – 1 Officer – 2

control Warehouse – 1 Warehouse – 2
Inventory control &
Stock Records
Section Warehouse-A Inspection

Inventory control Records Store keeper - Inspection

Inventory Stock 1 Store keepr- Controller
Controller-1 Record 2 Clerk - Fork Materials
Inventory Controller Lift Operator, Inspectors,
Controller-2 Labour Labour
Data-Entry
Operator

4
Saxena, J P. Warehouse Management & Inventory Control. New Delhi: Vikas
Publishing House Pvt. Ltd., 2005.

25
Delegation of authority

Delegation of authority is necessary to enable each functionary to take

decisions from the authorized persons in the most effective manner and in shortest
time possible. Delegation is required basically in following two areas of operation:
i) Administrative powers
ii) Financial powers

The delegation of administrative power in respect of activities of stores may

include the followings;

Administrative powers
• Fixing the store issue timings
• Authorizing the issue of materials
• Authorizing receipt of materials from the suppliers or other sources
• Rejecting items received from suppliers
• Deciding creation of Discrepancy Report
• Deciding on the resolution of discrepancies
• Regularization of shortages or excesses
• Authorizing the opening of the stores after office hours or on holidays
• Approving the schedule for stock taking
• Deciding on the obsolete and surplus items in consultation with the user
• Signing of gate pass
• Communication with other departments
• Approving overtime to stores staff

26
Financial powers
The financial powers are relating to approval of recurring expenses and may include
the followings:
• Stationery printing and equipment
• Communication charges
• Equipment rentals like hiring a crane of a higher capacity to load or unload
heavy equipment or component
• Insurance-Freight-Custom Duty-Insurance Survey Charges etc.
• Office maintenance and repairs
• Rent

Effects of stores functions on company’s costs

Store networks are incredibly complex and there is always an opportunity to
improve it. Stores act as a cushion between purchase and manufacturing on one hand
and manufacturing and marketing on the other. The inherent limitations of forecasts
make the stores function a necessity. There is always a tendency of management of
some organizations to look at the store functions as one of the non-productive
functions. This may undervalue and underestimate the importance of the stores
management. It may even discourage the personnel working in this department.
However, it is the time to understand the vital importance of the stores, particularly in
situations where the stores are preserving the scarce materials and make them
available to the manufacturing processes as and when needed in future. By proper
preservation and storage, the stores department minimizes overhead cost.

Costs involved in establishing and maintaining stores is also a point of

attention. The cost of stores can be categorized into a capital cost component and
revenue expenditure component. The capital cost consists of the sunk cost in land,
building, roads, yards, materials handling equipment and the related facilities. These
costs are irreversible in nature. It is therefore must be seen that proper planning is
done in reducing the capital expenditure, which may have direct bearing even on the
revenue expenditures. The revenue expenditures comprise of the expenditures

27
required for salaries and wages of the store personnel, maintenance costs, stationery
cost, communication expenses and inventory carrying cost.

Maintenance of store records

Maintenance of stores record is one of the important aspects of stores function.
It is absolutely essential for the availability of stock record of materials and their
quick verification. Timely entries of goods received and issues will keep the record up
to date. Failure to do the same will result into wrong information about the
availability or non-availability of stocks. This may delay replenishment of the item.
Insurance claim of an item will be delayed if the Inspection Note and the Discrepancy
Report for the item are not finalized and their details are not entered in the records.
Records that are normally maintained in the stores are as under:

* Materials Requisitions (MR)/Issue Voucher (IV)

* Material Requisition for Purchase for general items
* Raw Materials File (Separate for each raw material)
* Material Delivery Record and Goods Receipt Report File
* Invoice record
* Insurance Claims
* Critical Items Review File
* Discrepancies noticed and their status
* Management Reports
* Correspondence with various departments
* Standardization Correspondence
* Codification File
* Management Decisions
* Trade Literature
* Suppliers’ visit record
* List of drawings and manuals
* Contract files
* Personal files of stores employees
* Shelf Life Item Register
* Transporter Copies
* Purchase Orders
28
* Import Documents
* Excise Records

Printing of stationery
Stores division in manufacturing industry uses various standard formats for
recording the transactions of receipt, issues, stocking items, inspection of items and
physical verification of stock items. Since the activities of the stores division are of
continuous and receptive nature, printing of format is essential and has to be
essentially economical. Printing of formats improves the efficiency to a very great
extent. It becomes imperative for the stores division to lay down a policy on printing
of stationery/formats on the following grounds:-

i) What to print?
ii) When to print?
iii) Frequency of printing
iv) How much to print?
v) Review of printing material before sending for printing
vi) Authorized person to decide on printing
vii) Obtaining inputs of other departments on issued of their concern
viii) Authority to approve printing contract.

Various forms / documents[5] used in stores management are as under:

1) Stock Control Card
2) Special Purchase Requisition
3) Shortage Report Form
4) Daily Receipt Register
5) Discrepancy Report
6) Rejection Note
7) Material Dispatch Advice
8) Goods Inward Note
9) Bin Card
10) Internal Stores Transfer Note

5
Kasande, S. P.. Materials & Logistics Management. Pune: Nirali Prakashan, 2005.

29
 11) Class / Code Transfer Note
12) Material Return Note
13) Scrap Note
14) Scrap Sale Note
15) Material Requisition
16) Stock Verification Sheet
17) Stock Adjustment Note
18) Packing List
19) Delivery Note
20) Dispatch Instruction

As the names suggest, the above – named documents also imply the purpose of the
specific document to be maintained.

Functions and duties of stores manager

Stores Managers in any manufacturing organization has to perform the

functions relating to efficient receipt, storage, maintenance and issue of all materials,
equipment, spare parts etc. stored in the warehouse/stores and associated areas. The
manager also has to ensure the maintenance of up-to-date stock levels of materials,
and consumables that are regularly used and also has to participate inventory control
system and help purchase departments on this aspect.

Ideally, the duties of the Store Manager are as under:

i) To manage and supervise the activities of personnel assigned to Stores

department

ii) To plan and coordinate the safe and efficient receipt, storage and
issue of all materials and equipments.

iii) To plan and develop stores procedures for management’s approval,

ensuring sufficient control to minimize losses and maintain high safety
standards.
30
iv) To plan, coordinate and oversee the processing of physical inventories
documentation, ensuring that any discrepancies are satisfactorily
explained.

v) To coordinate materials documentation and stock data, ensuring that

materials and their movements are accurately entered into file,
replenishment and stock data is maintained and updated and all stock data
reports necessary for analyses are regularly issued and processed.

vi) Maintains strict material control, including reviewing orders and

determining validity of request according to job requirements prior to
releasing material and ensuring that all surplus materials are returned to the
warehouse/stores.

vii) To coordinate the reports and recommendations to the management

regarding materials control systems and procedures, stock levels, and
forecasts of a need as a result of historical data comparisons and
coordination with other division heads.

viii) To perform other duties such as training the subordinates, ensuring good
house keeping and observance of safety rules, follow up on queries and
preparing special reports. To motivate stores staff in developing new skills,
education and in increasing performance of stores to achieve desired goal of
the division/organization. To develop and maintain a good healthy and
cooperative atmosphere in the division as well as other divisions and
outside agencies/suppliers.

31
1.8 WORLDWIDE WAREHOUSE/STORES TECHNOLOGY
INTERFACE[6]

In order to improve productivity and control, warehouse/stores are seriously

considering the use of radio frequency identification [RFID] tags world over for day-
to-day operations. This wireless technology increases efficiency of warehouse/stores
management because, unlike bar-codes, which must be scanned manually to feed in
the information on computers, RF tags broadcast a signal with information about the
product they are attached to and about the location of the product in the stores /
warehouse. RFID technology provides an interesting option to complement data
collection and product identification in the supply chain management and
warehouse/stores operation.

Warehousing Trends[7]
Cost cutting practices-The need of the hour

There are many stores who are practicing cross-docking methodology to cut
down the costs incurring on account of loading and unloading of goods in the
warehouse/stores. Cross-docking refers to the incoming goods labeled with the names
and destination of the appropriate customers and ready for unloading in the stores.
Such goods are taken directly to the trailers destined for the appropriate customers
and that are already tagged. Since the goods do not enter the storage area, storage cost
is saved.

Most of the companies, particularly in recession period become more aware of

reducing the inventory costs by applying various practices like buying less. The high,
prerecession inventory levels will not return. Meanwhile, inventory turns will remain
6
Moore, Fred. "Using RFID For Warehouse Management - Wikibon." A Wiki for
Sharing Technology & Business Knowledge - Wikibon.
http://wikibon.org/wiki/v/Using_RFID_for_warehouse_management (accessed
March 22, 2012).
7
Jim Tompkins. "10 warehousing trends to watch – Warehousing – CSCMP's
Supply Chain Quarterly." CSCMP's Supply Chain Quarterly – Supply Chain
Analysis, Insight & More.
http://www.supplychainquarterly.com/topics/Warehousing/scq201005warehousin
g/ (accessed June 16, 2011).

32
at the recession adjusted, elevated levels. As a result, stores will have excess storage
capacity and will need to alter the density of their storage.

With the increased business volumes in terms of production and sales, the
stores work is seen increased day-by-day. Insufficient and inefficient staff in the
stores may hamper the overall success of the business. Increased work in the
warehouse/stores can impose a lot of pressure on the existing employees to be more
productive and to work longer hours. There are chances of high employee turnover in
such situations. Management needs to understand these dynamics and work to avoid
their damaging effects.

Timely upgrading of material handling system should be seriously considered

by the managers. If the demand for replacement of the handling material arises all of a
sudden, it may put financial burden on the company besides inconveniences to be
caused to the material handling space and the overall system.

Companies are involved in analyzing their core competencies and their peak
volumes, as a result of which the warehouse/stores functions are also being
outsourced. At the same time, logistics service providers have begun to understand
more about their own core competencies to help their customers and warehouse/stores
personnel in providing value proposition.

In most of the companies, warehousing/stores is viewed as a sub-process of

the end-to-end supply chain. This supply chain, at the outset, focuses on the customer
value. It becomes the prime duty of the warehouse/stores to contribute to a great
supply chain.

33
1.9 CURRENT TRENDS IN STORES MANAGEMENT IN
INDIA

There have been a number of developments in warehouse/stores management

for past few years. The conventional practice in receiving, stocking, measuring, and
issuing different types of materials in stores has taken back seat in many industries.
The recurring advancement in technology and availability of various advanced
equipments handling different types of materials in warehouse and stores have left us
astonishing at once. The methods and styles of warehouse/stores work have changed
tremendously to the advantage of the personnel working in such stores. Various new
software and computer aids have come to the rescue of these personnel making their
job more interesting than ever.

One major change that the stores management has undergone rigorously
almost in all manufacturing industries of middle and higher level is the elimination of
the labour-intensive activities. The use of modern material-handling equipments has
thus reduced the labour-intensive efforts, thereby saving time and energy.

According to Sameer K. Srivastava[8], warehouse/stores management in India

has been undergoing radical changes. The challenge of a growing economy is an
exciting time for warehousing in the Indian context. It is gaining the focus and
attention of many firms and supply chains. Many firms are thinking to expand the
warehousing/stores capacity. Many firms are looking towards overhauling of their
warehouse/stores operations. They want to make smarter use of existing space to
avoid costly expansions. Managers need to make sure that warehousing/stores link in
their supply chains acts as a competitive advantage for their firm. Most of our
warehouse/stores and stores are predominantly manually operated storage sites. There
seems to be great potential for ways to improve warehouse/stores/stores management.
There is a scope to suggest important managerial recommendations through this
study.

8
Srivastava, Samir K., Improving the Warehouse Management in the Indian
Scenario (April 27, 2010). 13th Annual International Conference of the Society of
Operations Management, Indian Institute of Technology Madras, Chennai,
December 20-22, 2009.

34
Globalization and Indian industries

Indian Industries has to face the challenges of globalization some of them can
be included as under –

1) Technology-Up-Gradation-Many multinational companies requires to adopt

latest production techniques for reduction of cost of production. In the context of
Integrated Supply Chain Management the major challenge is to adopt latest
production technology or to upgrade production system to reduce the cost or
production.

2) System Flexibility- In the Electronic Industries new developments are taking

place and new products are available with expected requirements within time with
better price to the customers. During this time, customer’s expectations are also
increased. To meet the expectations of customers, it is a difficult task to attract
customers and get better results of finished goods comparing with foreign goods. Due
to introduction of new products specifically in the Electronics Products such as
mobile phones, different communication equipments, personal computers, defense
equipments and entertainment electronics equipments, the rate of obsolescence of
finished products has increased which resulted in monetary loss to the Indian
Manufacturers. Therefore Management of the organization has to think for adoption
of more flexible system via Integrated Supply Chain Management for better results
for movement of finished products within time. Research and Development is equally
important factor to stand in developing newer products as customers’ expectations.

3) Global Logistics Management-The logistics management has to face the impact of

globalization. To fetch low transportation cost and to get advantages of competitive
logistics, it has become the most critical part of the logistics management.

4) Excess Capacity Utilization-Because of globalization it seems excess capacity

utilization because of market demand which resulted in increase of competition in the
industries. There are various reasons for this effect such as softened restrictions on
import of material by Indian Government, planning of business to meet the global

35
demand, technology up-gradation to get high production efficiency. On account of all
these aspects, industries could be benefitted for producing greater quantity and quality
at minimum cost.

5) Information-Because of introduction of network system, e-business started

becoming popular to manage the information all over the world at minimum cost and
faster time. Right Information at the right time for decision making is challenging task
before the organization.

6) Different Management Techniques-In the functional area of Materials

Management many multinational companies have to think for adoption of latest
management techniques to cut down the costs and improvement in quality standards
and reduction in cost of inventory/materials. These techniques includes –adoption of
Just-in-Time Production System, Kanban System, Total Quality Management (TQM),
Zero Defect Technique, Kaizen, New Source Development for procuring of materials,
Sub-Contract work etc.

7) Inventory Management-Another challenging area is Inventory Management.

This deals with procurement planning, lead time planning and scheduling and better
inventory control. For the Electronics Industries many components are imported
instead of local sourcing because of various reasons. The lead time of procurement
for imported material is more than indigenous materials. Therefore it is a challenging
task for Materials Management to maintain good flow of materials for production
schedules. Indigenous development of electronics components or materials is still a
difficult task with Materials Management.

8) Quality-To survive in the competition of global market, all materials including

procured materials should have lowest possible cost. Manufacturing process should
maintain excellent results. All these factors should meet quality standards and norms
and no deviation could be affordable in the global competition.

To meet expectations of the customers and stand in the competition of global

context, every manufacturing organization should have integrated approach to get
better results to the organization.
36
 To sum up, there is an urgent need to gear up the efficiency and to maintain a
high standard of discipline, honesty, integrity, civility and diligence for successful
functioning of Materials Management. The labour, if organized, assisted, backed
with suitable inputs can become the biggest stimulus for increasing the productivity.
Though Materials Management is on scientific basis, a spiritual vibration of “Work is
Worship” is essential for success in the Globalized Market.

Services dealing with stores operation management and distribution

management:

To minimize the demurrage and to expedite clearance, dispensing the

clearing, agency system is a proper solution.

To reduce cost of transportation different solutions should be studied while

conducting distribution management area.

Well organized inventory control section services as a good tool to avoid

surpluses in stocking and controlling the inventories.

A constant review of the consumption of materials in the past, anticipated

consumption, arrivals against pending orders and lead time required etc is
imperative before releasing the purchase order.

Greater care should be exercised in the procurement of Shelf Life Items

and Electronics Sensitive Items which require controlled storage
conditions to avoid deterioration. The supply of such materials must be
closely co-related with the consumption pattern so that possibility of
building up of stock which may lose their shelf life and become wasteful is
avoided.

An effective liaison between Production, Inventory Control, and
Commercial Departments would yield good results in reduction of
inventories.

37
1.10 ELECTRONICS INDUSTRY – AN OVERVIEW
The existing study focuses on the stores management practices in Electronic
Industry in Pune, particularly the companies which are manufacturing electronic
goods in their production units. Management of stores in any manufacturing
organization largely depends on the nature of the products the concerned company
produces. It is because the very nature of the product will reveal the stocking of
various items right from core raw materials to the allied spares and equipments. Since
the present study revolves around the storage practices in electronic industries in
Pune, it is imperative to know more about the various activities and the methods that
take place in such industry. The methodology and operations will vary according to
the nature of the products. As the study is focused on Electronic Industries, an
overview on this part is essential to know about it.

Introduction to electronics

The electronic-services have gained a wide range of attention and became an

indispensable part of the majority of people and nation’s life and living. The
changing lifestyle of people, and increasing urbanization has lead to increasing rates
of consumption of electronic products. They are touching every aspect of our lives -
the way we do business, keep in touch with family, bring up children or entertain
ourselves. These electronic products have been widely used by corporate,
households, government offices, public and private sectors, academic and research
institutes.

38
Growth of Indian Electronics Industry

India’s electronics industry is ranked 26th in the world in terms of sales and
29th in terms of production of various electronic products.(ELCINA –Electronic
Industries Association of India and Department of Information Technology-New
Delhi Study Report-Jan-2012). India’s electronic industry is still in its nascent stage
by global standards and is expected to grow at a significant rate over the next few
years. This growth is largely contributed by growth in mobile phones, consumer
electronic products like TV, DVD, etc and Information Technology and Office
Automation products like computers, printers, etc.

The high growth has attracted many companies in these industries to either set
up new manufacturing facilities or expand their production capacity in India over the
last few years. Some notable companies that have set up their manufacturing units in
the last couple of years include Samsung, Dell, Nokia, Motorola and Cisco.

The growth of the electronic industries has automatically triggered the

expansion of the component industries. The components produced in India include
picture tubes, diodes, transistors, power devices, resistors, capacitors, switches etc.

Consumer durables and telecommunications account for almost 60% of the

demand for electronic components in India. This is followed by Information
Technology, Office Automation and Automotive Industries, which contribute to about
22%.

The demand for the electronic components in India is largely met through
imports to about 60%. Major countries from which imports are made include China,
Taiwan, South Korea, Japan and few of European Countries. The share of the imports
is high for specialized and precision components, ICs, Chip Components, LED etc.

What is electronics?
Technically, “Electronics is an extension of Electrical Engineering.” However,
the following definitions will help us to understand the term ‘electronics’ in a better
way:
39
Various definitions of the term ‘Electronics’:

“Electronics[9] is the branch of physics and technology concerned with the

design of circuits using transistors and microchips, and with the behaviour and
movement of electrons in a semiconductor, conductor, vacuum, or gas”

“Electronic is a device[10] or technology associated with or employing low

voltage current and solid state integrated circuits or components, usually for
transmission and / or processing of analog or digital data.”

As per the Britannica Concise Encyclopedia[11], “Electronics is a branch of

physics that deals with the emission, behavior and effects of electrons and with
electronic devices. The beginnings of electronics can be traced to experiments with
electricity. In the 1880s Thomas Alva Edison and others observed the flow of current
between elements in an evacuated glass tube. A two-electrode vacuum tube
constructed by John A. Fleming (1849) produced a useful output current. The Audion,
invented by Lee De Forest (1907), was followed by further improvements. The
invention of the transistor at Bell Labs (1947) initiated a progressive miniaturization
of electronic components that by the mid-1980s had resulted in high-density
microprocessors, which in turn led to tremendous advances in computer technology
and computer-based automated systems semiconductor.”

9
Oxford Dictionaries . "Electronics."
http://oxforddictionaries.com/definition/english/electronics.
oxforddictionaries.com/definition/english/electronics (accessed March 25, 2012).

10
Business Dictionary . "What is electronic? definition and meaning."
BusinessDictionary.com - Online Business Dictionary.
http://www.businessdictionary.com/definition/electronic.html (accessed
February 12, 2011).

11
"electronics: Definition from Answers.com." Answers - The Most Trusted Place
for Answering Life's Questions. http://www.answers.com/topic/electronics
(accessed February 12, 2012).

40
 “Electronics is the branch of science[12] that deals with the study of flow and
control of electrons (electricity) and the study of their behavior and effects in
vacuums, gases, and semiconductors, and with devices using such electrons. This
control of electrons is accomplished by devices that resist, carry, select, steer, switch,
store, manipulate, and exploit the electron.”

“Electronics[13] is the science dealing with the development and application of

devices and systems involving the flow of electrons in a vacuum, in gaseous media
and in semiconductors.”

Thus, the electronics is concerned with design, manufacture and application of

transistors, diodes, integrated circuits and other semi conductor devices and to some
extent electron tubes.

The electronics is used in each and every field for better accuracy and
precision and of course for ease of use. Industries engaged in electronics
manufacturing are classified as –

a) Components manufacturers
b) System manufacturers.
c) Product manufacturers.

Indian Electronics Industry[14]

Electronics industry is classified as –
1) Consumer Electronics-TV-Refrigerator-Washing Machines-DVD etc

12
"electronics: Definition from Answers.com." Answers - The Most Trusted Place
for Answering Life's Questions. http://www.answers.com/topic/electronics
(accessed February 12, 2012).

13
"Electronics | Define Electronics at Dictionary.com." Dictionary.com - Free
Online English Dictionary. http://dictionary.reference.com/browse/electronics
(accessed February 12, 2012).

14
ELCINA DIRECTORY (1983) and Department of Information Technology
Ministry of Communications & Information Technology, Government of India)

41
2) Professional(Industrial) Electronics which covers-control, instrumentations
and industrial electronics-computer and calculators-communication and
broadcasting, aerospace, defence, machine tools electronics and satellite
electronics etc.

Indian Electronics Market is divided into –

a) Consumer Electronics –use for individual and homes

b) Infrastructural Electronics -which covers to civic services for common use
c) Industrial Electronics –which covers servicing the needs of business and
industry and
d) Defence Electronics –which covers needs of army, navy and air-force.

The present study of stores management relates to the following industries dealing
in electronics:

Industrial Electronics

Automation Electronics

Industrial and Defence Aero Space Electronics

Defence Electronics

Electronics Service Manufacturers (Assembly work)

Weather Equipments

Agriculture Electronics

Auto Electronics

Component Electronics

Test Equipments

Auto Electrical and Electronics

Machine Tool Electronics

Industrial diversity in Pune region

Pune industrial region encompasses the large scale sector, which manufacture
pharmaceuticals, electrical appliances, electronic instruments, diesel engines, electric
fans, machine tools, air compressors, chemicals, dye-stuff, sugar machinery, scooters,
trucks, tempos, trailers, paper, paper boards, cables, rubber goods, glass, plastic, TV
parts, etc.

42
 Similarly, Pune is also occupied by a number of small scale industries which
manufacture brass and copperware, furniture, toys, mulls, hosiery, leather articles,
dyeing and printing. Small scale industries also manufacture chemicals, soaps,
pharmaceuticals, electrical equipment, sports goods, stationery goods, printing
engineering, scientific instruments, electronic equipment, machine tools etc. A
number of small-scale industrial units are also working as ancillaries to the new
industrial units which are started in the vicinities of Pune.

Location-wise, industries in Pune are well distributed over the whole region,
creating some well demarcated pockets of industries. To the north-west of Pune city
are situated the well known industrial areas of Khadki, Pimpri-Chinchwad-Bhosari.
To its east are Hadapsar and Loni, to North-East is Yeravada, Pune-Nagar Road and
Dhanori and within the city itself industries have concentrated along Karve Road,
Satara road, near the railway station, along the Shankarsheth Road and near the
Gultekdi area. Near about Pune, industries have been started at Khed Shivapur-
Shirval-Bhor, Lonavala, Talegaon, Saswad, Pirangut, Sanaswadi and Chakan,
Walchandnagar in the district.

Electronic Industry in Pune[15]

During last few years, Pune has developed into a centre for electronic industry.
Starting from basic transistors and other semi-conductor devices, electronic industries
in Pune was also involved in manufacturing goods like TV sets, VCRs, and
components of all types. Now, small and medium scale equipment manufacturers are
also specialized in different lines of instrumentation, such as digital equipment,
process control equipment, industrial equipment, consumer equipment,
communication equipment etc. Pune has a unique collection of electronic
manufacturers. In addition, there are a large number of research laboratories and
other government establishments in Pune wherein continuous research and
development in the field of electronics take place. The Government has also
established a testing development centre for Electronics at Pune.

15
Directory of Electronics Industry . Pune: Mahratta Chamber of Commerce,
Industries and Agriculture, 1999.

43
 MIDC built three multi-storied buildings in MIDC, Bhosari for small
electronic industries. About 34 units engaged in electronic industries have set up their
manufacturing establishments in these buildings. In addition to this, a separate
electronic zone is developed by MCCIA(Mahratta Chamber of Commerce and
Industries and Agriculture, Pune) in cooperation with Department of Electronics and a
Technology on Pune Satara Road. Some of the small scale industries are established
in small apartments and even outhouse of buildings. On different locations these
industries are established and catering their services/manufacturing activities in and
around Pune. Thus all these factors are contributing substantially for the sustainable
development of electronic industries in Pune area.

Electronics is an important business sector in which Pune has the core

competency. The availability of technical skills in large numbers and the presence of
renowned R&D Institutions, both in public and private sectors and more importantly
in Defence have resulted in the emergence of strong electronics industry in Pune.
Even though the majority of electronics industries are in small scale sector, they are
owned by technocrats.

Pune’s Electronics Industry is famous for the production of low volume

electronic equipment particularly in the specialized field. With its phenomenal
growth, Pune is witnessing major change in the Industrial scenario and it has emerged
as a major investment centre in this region. With the globalization, a whole new
range of opportunities are available in Pune for electronic goods manufacturers.

Electronics Products Manufactured in Pune[16]

- Consumer Electronics
- Audio Equipments
- Video Equipments
- Control, Instrumentation and Industrial Electronics
- Test and Measuring Instruments
- Medical Electronics Equipments
- Analytical Instruments

16
Directory of Electronics Industry-Mahratta Chambers of Commerce and
Industries and Agriculture, Pune-1999

44
- Special Application Instruments
- Industrial Electronic and Automation Equipments
- Process Control Equipments
- Power Electronics Equipments
- Office Equipments
- Misc. Electronics Equipments
- Data Processing System
- Computer Peripheral
- Communication and Broadcast Equipments
- Strategic Electronics
- Electronics Components-Electronic Tubes
- Semiconductor Devices
- Passive Components
- Electromechanical Components
- Agriculture Equipments and their spares of electronics.
- Parts of Electronic Components-Electron tubes, Receiving Tubes, CR Tubes-
X-Ray tubes, Diodes and Transistors, Opto Display Devices, Power
Semiconductor Devices-Resistors-Transformer coils, Crystals, Relays-
Electronic chemicals-Plastic Films-Laminates-Plastic and Polymers, Glasses,
Sealing Glasses-Insulating Papers are produced in Pune Industrial Belt which
are popular in Indian Market.

45
POPULAR PUNE ELECTRONICS INDUSTRIES ON INDIAN
SCENARIO ON THE BASIS OF THEIR TURNOVER
Sr.No. Name of the Company Products Manufactured

1 Bharat Electronics Ltd Magnesium and Lithium Batteries-Laser,

Range Finder-X-Ray Tubes

2 Sterlite Technologies Ltd Optics fibers, Fiber optic cables, Copper,

Telecom cables, Structured data cables, Power
transmission conductors, Aluminum, and
Alloy Rods

3 Amphenol Interconnect MIL, AV & RF Connectors

India Pvt. Ltd

4 Mahindra Hinoday Permanent Magnets, Soft Ferrite Cores,

Customized Magnetic Products.

5 Vishay Components India Film Resistors, Capacitors Diodes, Ceramic,

Pvt. Ltd Electrolytic, Inductors, Opto-coupler And
Semi Conductor

6 Traffo Electronics Transformers, Chokes, Reactors and Coils

7 Cermet Resistronics Fusible Film Resistors, Fusible Wire wound,

Pvt.Ltd Resistors etc

8 Shogini Technoarts Pvt. Single Sided and Double Sided, Printed

Ltd Circuit Boards (PCBs)

9 Finolex Cables Co-axial Cables, Telecom Cables and Power

Cables

10 Satronix (India) Pvt.Ltd Solid State Relays

Source-ELCINA –Electronic Industries Association of India and Department of

Information Technology-New Delhi Study Report Jan-2012.

46
Status of Special Economic Zones (SEZ) In Pune Industrial Belt SEZ Rules

1) SEZ Rules-Simplified procedures for development, operation, and

maintenance of the Special Economic Zones and for setting up units and
conducting business in SEZs.

2) Single Window clearance for setting up of an SEZ.

3) Single widow clearance for setting up a unit in a Special Economic Zone.

4) Single window clearance on matters relating to Central as well as State

Government.

5) Simplified compliance procedures and documentation with an emphasis on

self.

Ref-ELCINA Study Report-2012

47
Status for SEZ in Pune Electronics Industries are stated below-

Sr.No. Name of Company Type of SEZ Status

1 Benchmark Reality Electronic Hardware and Approved

Pvt.Ltd Software including Information.
Technology(IT)/Information
Technology Enabled
Services(ITES)
2 Magarpatta Township Electronics Hardware and Operational
Development And Software
Construction Co.Ltd
3 Kumar Builders Electronic Hardware and Operational
Township ventures Software
Pvt. Ltd.

Source- ELCINA Electronic Industries Association of India and

Department of Information Technology-New Delhi- Study Report Jan-
2012

48
Manufacturing Hubs in Pune Area

Most of the large electronic manufacturing companies (Indian or

Multinational) are located in Pune along with Delhi, Mumbai, Bangalore, Chennai.

In Pune not only the electronic component companies are established but also
the companies from other sectors like Automobile, Health Care, FMCG, Telecom
sectors, Agriculture are available. Pune is the upcoming manufacturing hubs in India.

In Pune-SEZs setting SEZ for Electronic Hardware and Software including

Information Technology establishes services.

Information is the basic building block for the success of any manufacturing
industry. Substandard infrastructure severely affects the component or equipment
manufacturing as it leads to higher cost, long lead time and lower quality of products.
It is observed that even prominent industrial estates are available in Pune similar to
those in Ghaziabad, Vapi, Bangalore, Mumbai etc.

(Ref.ELCINA-Electronic Industries Association India and Dept. of Information

Technology, New Delhi-Study Report Jan-2012)

ROLE OF CENTRE FOR MATERIAL FOR ELECTRONIC TECHNOLOGY

(C-MET)-PUNE

Centre for Material for Electronics Technology (C-MET) has been set up as a
Registered Scientific Society in March-1990 under Department of Information
Technology (Formerly Department of Electronics) as a unique concept for
Development of viable technologies in the area of materials mainly for Electronics.
C-MET is operating with its laboratories with specialization at Pune(Maharashtra),
Hyderabad (Andhra Pradesh) and Thrissusr (Kerala-State).

49
Activities of Centre for Electronics Test Engineering-Pune

Centre for Electronics Test Engineering was set up for the benefit of
Electronics, IT, Agriculture and other industries for providing training under the Govt.
of India with the initiative of the chambers and support from ZTG-Germany. The
Govt. of Maharashtra and Pune Muncipal Corporation have supported this project as
well. This is the first of its kind centre supported by industries.

Some other Research Institutes such as Automotive Research Association of

India, Central Institute of Road Transport, National Chemical Laboratory, Indian
Armament Technology are having facility for testing of electronic components and
they are providing this facilities to industries.

Challenges faced by electronic industries in India[17]

The demand for electronic hardware items in India is increasing at a rapid

pace. Only 40% of the total demand is catered to by the Indian manufacturing with
the rest being imported largely from countries like China, Taiwan, and Malaysia etc.
popularly known as the Asian Tigers.

The major challenges faced by the electronic manufacturers in India could be

broadly classified into the following –

Infrastructure related challenge

Infrastructure is the basic building block for the success of any manufacturing
industry. Sub-standard infrastructure severely affects the component manufacturing
as it leads to higher cost, longer lead time and lower quality of products.

It is observed that even prominent industrial estates like those in Ghaziabad,

Pune, Vapi, etc lack the basis infrastructure facilities that are considered to be the
norm in most other countries. Thus, it is imperative to focus and address these

17
(Jan 2012). Electronic Industries Association of India. New Delhi: Department
of Information Technology, Ministry of Communication and Information
Technology.

50
challenges. The infrastructure challenges are primarily the result of non availability
and / or poor quality of power and logistics. Some of the important challenges are to
be faced by Indian Electronic Industries are as under-

a) Quality of power in the industrial areas has deteriorated over the past few
years due to demand growth outpacing supply creating pressure on the
electricity supply system.

b) The Cost of Procuring Power for Industrial units in India is nearly double of
that in China or Malaysia. This results in additional cost of the production,
thereby, leading to lower price competitiveness.

c) Logistics is a critical factor for efficient manufacturing. With high

dependence on imports and movement of goods to different manufacturing
locations, the Indian electronic industries require efficient logistic support.
Therefore, the need for connectivity between the industrial hubs, ports and
market is a critical requirement for success. Most industrial hubs have poor
road connectivity and few of them rail connectivity. This leads to –delay in
shipments/products reaching the target destination and deters the local talent to
work in the industrial hubs.

d) Funds and Investments: Most banks and financial institutions do not offer
them loans at competitive interest rates. In most cases, they also insist on
collaterals which make it even more difficult for such companies to get loans.

e) Government Policies: The role of the Government is extremely important.

Favorable and stable Government policies with a long term outlook are
expected to provide the industry with the much needed impetus to trigger the
next level of growth. Most electronic manufacturers believe that the existing
policies of the Government are not conductive for local manufacturing.
Procedures and approvals, complex tax structure and Inverted duty structure
are some of the key challenges that are detrimental to the growth of the
industry.

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f) Procedure and Approvals: The procedures and approval processes for setting
up a manufacturing unit are extremely complex in India. In addition to this,
the procedural delays and approval cost in the Government machinery add to
the woes of the manufacturers. Each shipment requires compliance to
cumbersome procedures leading to avoidable delays in dispatches. In addition
to these delays, the cost of export is also higher in India when compared to
China and Malaysia. The cost includes the cost towards documentation,
custom clearance, inland transport, port and terminal handling and other
official costs incurred for exporting.

g) Complex Tax Structure: In India, taxes are levied not just by the center, but
also by the states and even the local municipality. In addition due to the
different taxation rates and policies prevailing in different states, the cost of
production from two plants located in two different states of India could be
different. Multiple taxes such as Central Sales Tax, VAT, Central Excise,
Service Tax, Surcharge, Education Cess etc, could be applicable depending on
the transaction and offerings and add to the administrative cost.

g) Inverted Duty Structure: Inverted duty structure refers to a situation where the
duty on the finished products is lower than that on raw materials and
intermediate products. This acts as a disincentive for the domestic electronic
component manufacturers who have to pay a higher price for the raw materials
while the finished products can be imported at lower rate of duty. This leads
to preference for trading and low value addition activity (such as assembling
and packing) rather than manufacturing. The inverted duty structure has been
corrected in most cases but even today manufacturers have to import inputs
under a specific Customs Notification for which they have to follow a very
cumbersome procedure.

h) Other challenges: Among other challenges that are faced by the Indian
electronic industries are skilled labour, R&D facilities availability and
sourcing of raw materials are important as these affect the growth of the
industry significantly.

52
 Electronic equipment manufacturing industries depend upon component
industries. Without their efficient support equipment manufacturing cannot run. This
supportive work is carried out by Indian component industries and their contribution
towards progress of electronics industries has equal importance.

The effective management of materials plays a very important role in the

working of industry. The same is valid for electronic industry as well. It has been
observed that so far no systematic study of materials management in general and
stores management function in particular of the electronic industry has been carried
out in this area. Therefore, it was decided to conduct the study on stores management
for electronic industries.

Store functions – vital performance

It is certain that the function of managing the stores in any manufacturing

organization by itself may not be very important apparently. However, failing to
perform efficiently in the said function can affect a number of other vital functions
including production process itself. There is no reason to underestimate the
importance of the store management in this sense. The present study therefore focuses
on the essential elements of the stores management and also to make in depth inquiry
of the current practices in stores management with special reference to the electronic
industries producing various electronic goods in and around Pune Industrial Belt.

53
1.11 SUMMARY

The present study has certain objectives in view of the current practices in
managing stores at the electronic goods manufacturing industries in and around Pune.
Stores are highly important when it comes to managing and controlling the overall
inventory. Stores efficiency can have direct effect on the performance of production
and materials management in the company.

Being a vital part of the management, stores in such organizations have to

undergo all the functions and procedures of the management including planning,
organizing, coordinating, motivating and controlling, without which no stores can
perform.

Stores, in any organization deal with the materials that is brought in, stored
and issued as per the procedures and needs of various departments. These functions
are carried over by the personnel appointed for the purpose. It is imperative for any
business organization to look into the requirements of these personnel so as to carry
the function without interruption and with optimum results. There is frequent
interaction of stores with other departments in the organization, especially with
production, purchasing and finance departments. All these departments are expected
to understand the linkage amongst them and the effect of not performing or
coordinating with each other. A small negligence amongst these departments can
cause anything to the company.

Management encompasses all the functional areas like Production, Materials,

Finance, Marketing and Human Resource Management. The Industrial Management
Branch deals with mainly manufacturing management. It relates to sub systems of
raw material procurement, stores and inventory control, production planning system
and production schedule on the basis of market forecasting.

Stores and inventory control involves physical control of materials,

preservation of materials, minimization of obsolesce and damages, timely disposal of
scrap, surplus, efficient handling, maintenance of stores records, proper location and

54
stocking. The Inventory control covers aspects such as setting inventory levels, ABC
(Always Better Control), HML(High –Medium-Low), VED (Vital, Essential and
Desirable), SDE (Scarce, Difficult to Obtain –Easy to obtain), GOLF (Government,
Ordinary, Local, Foreign), FSN (Fast moving, Slow Moving and Non-moving), SOS
(Seasonal, Off-Seasonal), and XYZ Analysis, Fixing economic Order Quantity
(EOQ) standardization and variety reduction techniques are used for better inventory
control.

This covers clearance of materials, customs clearance, maintenance of stock

records and liaison in between other departments of the organization for smooth flow
of materials and better inventory too.

Since the present study is related to the stores management of the

manufacturing organization particularly in electronic goods, the researcher has set
various objectives for the study. One of the objectives of this study is to study the
impact of interference by other departments in store activities that may hamper its
functions. It is imperative for store department to interact with other departments like
finance, marketing, human resource, and above all purchase and production.

There are various modern techniques like ‘Just-in-Time’ that are implemented
in a few organizations only from inventory control point of view. There are many
others which are not using the same. The study is also directed to know the
advantages and disadvantages of implementation and non-implementation of systems
in store. During the informal discussion with some of the key members in store
department of other electronic companies, the researcher has come to know that some
of them were not aware of such technique. The researcher has therefore taken this as
one of the objectives of the study.

55